Before I Head Down to D.C….
March 3, 2009
…Let me share with you a few questions and topics of interest:
1. Why can’t the National Telecommunications and Information Association (NTIA) use the same qualifying language for fund eligibility as the Rural Utilities Service RUS? In sum and substance, a company is not eligible for funds under the RUS if they have more than a 2% national market share. This would eliminate the concerns of ILECs, big wireless, and large cable companies who already have billions of dollars from engorging themselves further. Give us guys under 2% market share a chance!
2. For fiber infrastructure deployment-–it is my belief that carriers that provide an open access network platform should be favored over those who don’t. Carriers (who as a normal business practice offer wholesale backbone capacity and dark fiber leases to other carriers) should move to the head of the line. In my opinion, any Federal dollars spent on fiber optic backbone should have a requirement that, at a minimum, dark fiber must be made available to other carriers on a commercial lease basis. A closed network carrier plus Federal funding for network extensions will not promote competition-–just a bigger closed network footprint. Carriers with closed networks should be required to open an appreciable percentage of their existing dark fiber for lease to other carriers before getting dollar number one from the NTIA. Talk about a fiber fantasy!
3. Flipper…and I don’t mean the dolphin. Yes, there are entities out there that will take the funds, install or warehouse something (fiber, PoPs, tower, wireless, WiMax, etc.) and then sell it to someone else a few years down the road for a profit. Since the NTIA funds are grants, whatever flipper gets is 100% profit.
4. The over-reachers. How will funds be managed to avoid a carrier from building over an existing carrier, especially a closed network carrier building over a carrier with an open access network platform as described in point #2? Remember the great land grab and Telecom meltdown circa 2001-2003-–lots of redundant networks built on top of each other in certain markets. Back then, private capital took billions of dollars of losses, given the irrational exuberance of “build it and they will come” prevailing culture. If CEO’s were willing to piss away private capital, what makes one believe some won’t do it with public grant money that comes without any equity interests?
5. Cross dressing. How will funds be managed to optimize their use? For example, AFS is very good at metropolitan fiber optic network deployment. We are very efficient at it and know the ins-and-outs. I would not expect that AFS pitching tower builds for Federal funds to be taken seriously (in a rational world) as this is not a historical, established proven core competency. Likewise, one would not expect a wireless mesh back haul provider to be seeking funds to deploy a fiber optic infrastructure when it is not a proven core competency. Federal funds should not be used for on-the-job training and new ventures. Once again, if open access platforms are funded as a priority as described in #2 above, the capacity or dark fiber lease will be available to others not so situated. I must be dreaming.
6. What stops a firm receiving funds by grant from placing them on their balance sheet and then levering them with debt? Sure, they will use funds to meet the Federal proposal–but why should the tax payers get cut out of the gravy if they can lever the funds? Let’s face it, if a participant levers funds by debt and goes bankrupt, the taxpayer is stuck as well. Some companies may actually lever funds by debt, and use the debt to pay dividends. Is that good use of the program? (Did I just piss off a bunch of shady types or hand out a real good idea for the ethically challenged?)
I have more, but will save it for my beltway visit. The above, at least to me, is all about commonsense. As much as I’m tempted to write further about commonsense and the beltway, my commonsense tells me to stop writing now.
Written by Dave Rusin - Telecom Executive
Posted by wbrache | Filed Under American telecom, Telecom news, Telecommunications industry, Telecommunications news, Wall Street Bankers and Telecom
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